Cement demand growth is expected to halve to around 5 to 5.5% this fiscal, due to weak
government spending in first half and liquidity crunch faced by the real estate market, a
report by Crisil Research said.
The rupee on Tuesday dropped sharply by 97 paise to more than nine-month low of
72.39 against the US dollar as heavy sell-off in the domestic equity market, weak
macro environment and a stronger greenback kept investors edgy.
The Indian currency came under pressure after official data released on Friday showed
that India’s GDP growth fell to an over six-year low of 5% in the June quarter. Besides,
the growth of eight core industries dropped to 2.1% in July, mainly due to contraction in
coal, crude oil and natural gas production.
MSME Minister Nitin Gadkari has called a meeting of heads of banks, finance ministry
officials, and CEOs of several of central PSUs on Thursday to sort out the problem of
delayed payments being faced by small and medium enterprises, sources said.
MSMEs have been expressing concern over failure of the Micro and Small Enterprise
Facilitation Council (MSEFC) in resolving cases of delayed payments within the
stipulated 90 days. “This major issue is on the agenda of the September meeting
convened by minister Gadkari,” an official said.
The meeting may also consider modification of the relevant rules governing the sector
for recovery of dues by way of arrears of land revenue. The MSEFCs of Madhya
Pradesh, Bihar and Jharkhand have such provisions. It may also be considered to
replicate the Tamil Nadu model where the chairman of the state MSEFC uses video
conference facility to expeditious settlement of MSME payments. Besides, proposal of
setting up of more than one MSEFC in each state is also on the agenda.
As per the MSMED Act, a buyer from MSME is liable to pay compound interest with the
monthly instalments to the supplier on the amount at the three times of the bank rate
notified by RBI in case he does not make payment within 45 days.
Fitch Solutions Macro Research on Tuesday said it has lowered its 2019 global steel
price forecast as global prices continue to be hammered by poor sentiment amid
ongoing United States (US)-China trade tensions and increasing downside risks to the
global economy. In the long term, Fitch Solutions maintains its view that prices will ease and embark on a multi-year declining track as fundamentals loosen with falling demand
and increasing production.
Fitch Solutions Macro Research said in a statement “we are revising down our 2019
global steel price forecast from an average of $650/tonne to $600/tonne, as prolonged
weak investor sentiment on the back of the ongoing trade tensions between the US and
China and increasing downside risks to the global economy continues to pressure
The demand growth in the steel sector in India is expected to be lower at around 4% in
2019-20, as against the earlier estimated growth of 7%. India Ratings and Research
(Ind-Ra) has revised its outlook for the steel sector to stable-to-negative from stable for
the remaining part of FY 20 due to sluggish demand growth in the segment.
According to Rohit Sadaka, Director-Large Corporates, India Ratings, growth in the
auto sector which accounts for 12-13% of the total steel demand in the country is likely
to be either stagnant at last year’s level or even slightly negative. Infrastructure and
construction, which together account for nearly 55 of the total steel demand, is also
likely to see a muted or slightly lower growth this year.
“On account of slowing domestic steel demand we have revised our growth projection
to 4% from the previously estimated 7% for this fiscal. The lower growth will be mainly
on account of the auto sector, capital goods, real estate and infrastructure,” Sadaka
The outlook also factors in increased import risks especially from Free Trade
Agreement (FTA) countries such as Japan and South Korea due to impact of the
slowing global growth and continuing trade frictions. This apart, there is uncertainty
over sourcing of iron ore, with mining lease for a number of mines expiring in March
next year. These mines will be auctioned in line with the Mining and Minerals
Regulation (Development) Act.
“Sourcing of iron ore will be a big concern for steel industry. If the process of auction of
mines is not expedited then it might impact the availability of iron ore which will also
affect raw material prices,” he said.
Cement stocks continued their downward spiral on Tuesday (03.09.2019) with ACC,
Ambuja Cements, UltraTech Cement and Shree Cement losing more than 4% on the
bourses. In fact, Ambuja Cements hit a fresh 52-week low. Analysts said that their
channel checks suggest that demand woes continue for these players with August
cement volumes continuing to disappoint, and this is putting pressure on cement prices
month after month.
Mr Binod Modi at Reliance Securities said that dealers opine that continued slowdown
in government projects led by delay in payments continues to hurt the industry. Rating
agency, ICRA says domestic cement demand growth is expected to slow down to
around 7% in FY20 as compared to 13% during FY19.